New Truth in Lending Rules for new Homebuyers

Published: 31st July 2009
Views: N/A

On July 30, 2008, Congress enacted the Housing and Economic Recovery Act of 2008 (HERA). Within HERA, Congress included amendments to TILA which are known as the Mortgage Disclosure Improvement Act of 2008 (MDIA). On October 3, 2008 Congress further amended the Mortgage Disclosure Improvement Act as part of the enactment of the Emergency Economic Stabilization Act of 2008 (Stabilization Act). With the enactment of HERA and the Stabilization Act, the Federal Reserve Board is now amending Regulation Z with all provisions of the MDIA and making these changes effective as of July 30, 2009.

The immediate changes you need to know about MDIA requirements are as follows: 1. MDIA implements a 3-7-3 rule that creates new timing and waiting requirements with regard to the issuing of Truth-in-Lending disclosures and when closing can occur. The 3-7-3 rule requires the lender to: A. Upon the taking or receipt of a loan application, provide an initial Truth In Lending(TIL) to the borrower(s) within 3 business days of the application (no change to current requirement). B. Impose a waiting period BEFORE allowing a loan to close. The waiting period requires a lender to wait until the 7th business day following the delivery or mailing of the initial TIL to the borrower(s) before a creditor may close any loan. The 7 day period may be waived only if there is a bona fide and/or extreme and/or urgent reason to do so. This would be handled in the same manner as a waiver of rescission, which is virtually impractical to achieve. Therefore, there will be virtually no waivers of the 7 day waiting period. C. Impose an additional 3 day waiting period before a loan may close in any instance in which the Truth In Lending(TIL) is outside of regulatory tolerances (e.G., for regular or fixed rate loans more than .125% and for irregular loans more than .25%). The 3 day period begins with the mailing of the TIL. A corrected TIL is required whenever a TIL is outside of regulatory tolerances. D. The TIL may be mailed via regular mail or overnight or by e-sign or e-mail. However the lender sends the TIL, they must still comply with the 3 day waiting period. MDIA does not assume a quicker waiting period might occur and does not allow the lender to proceed until after the 3 day waiting period has ended.

2. Lenders can under no circumstances collect any upfront fees prior to the consumer's receipt of an accurate TIL unless the fee is to cover the cost of the consumer's credit report. A. The fee collected must be bona fide and reasonable (no padding of fees and do not collect a fee unless the consumer is actually responsive if there was no intent to charge them for the credit report). B. A lender and third party such as a broker must adhere to the same rules regarding the collection of fees. If a third party forwards a consumer's written application to a lender, both the lender and third party do not collect any fee, other than a credit report fee if a credit report was pulled. C. If a third party forwards a consumer's printed application to a second creditor following a prior creditor/lender's denial of an application made by the same consumer (or following the consumer's withdrawal), where fees have already been assessed, the new creditor/lender or third party does not collect or impose any additional fee until the consumer receives an initial TIL from the new creditor/lender.

3. An initial Truth-in-Lending disclosure must now be issued on a closed-end principal dwelling and a second home whether transaction is a home purchase transaction, a new construction loan, or a refinance. Previously, initial TIL's were not required on refinances. The changes continue to exclude issuing an initial TIL on an investment property loan or a HELOC. A.. For a primary residence, any non-owner occupant must also receive a copy of any TIL that is issued.

4. A new required "Notice" will be added to the TIL advising a consumer they are not obligated to proceed with the loan if they do not wish to do so.

5. No initial TIL is required if a consumer withdraws or is denied within 3 days receipt of the loan application.

6. Under the amended rules, a business day is any day other than Sunday or a legal holiday - which is the same as the current rescission day definition.

7. Any waiver of the 3 or 7 day waiting periods must be treated the same as waiving rescission. There must be a bona fide emergency before a waiver request will be considered. A. A waiver when granted may not be a preprinted letter. The borrower(s) must handwrite a request to waive the 3 day or 7 day period and must describe the bona fide emergency. B. Any waiver requested and granted must be signed by all parties that take part in the transaction.

8. MDIA does not amend any requirements specific to HELOC loans.



David A Miller has been a mortgage loan originator in Central Ohio for over 19 years. He specializes in FHA mortgages, refinances, VA mortgages, remodeling loans and Commercial mortgages. Check out his websites at http://www.Davemillermortgages.Com or http://www.Ohiomortgagedude.Com for all the information you need to make an informed mortgage decision. Follow Dave on Twitter at http://www.Twitter.Com/yourloanexpert.

Report this article Ask About This Article


Loading...
More to Explore